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U.S. will hit debt ceiling by May 16, Geithner warns Congress

April 4, 2011 | 2:37
pm

The United States will reach its debt ceiling by May 16, increasing the need for Congress to act quickly so the federal government can continue borrowing and avoid defaulting on some of its debt, Treasury Secretary Timothy F. Geithner warned Congress on Monday.

The Treasury Department had estimated that the nation would reach its $14.29-trillion debt limit between April 5 and May 31. But in a letter to congressional leaders, Geithner said new calculations based on projections of income tax receipts show that the date will be no later than May 16.

The Obama administration is pushing Congress to increase the debt limit, as it has done 75 times since 1962. The nation has never failed to increase the limit, Geithner said.

But Republican congressional leaders and at least one Democrat, Sen. Joe Manchin of West Virginia, have said they won't vote to increase the debt limit unless the move is accompanied by deep spending cuts. As the date approaches, Geithner warned that Congress is risking "unthinkable" consequences if the U.S. can no longer to borrow to pay its bills.

"If Congress failed to increase the debt limit, a broad range of government payments would have to be stopped, limited or delayed, including military salaries and retirement benefits, Social Security and Medicare payments, interest on the debt, unemployment benefits and tax refunds," he wrote. "This would cause severe hardship to American families and raise questions about our ability to defend our national security interests.

"In addition, defaulting on legal obligations of the United States would lead to sharply higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans," Geithner continued. "Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover."

Geithner said the Treasury Department has the ability to maneuver some of its payments to buy some time. But those "extraordinary measures" would push the deadline only to about July 8.

"At that point, the Treasury would have no remaining borrowing authority, and the available cash balances would be inadequate for us to operate with a sufficient margin to meet our commitments securely," Geithner wrote. "The longer Congress fails to act, the more we risk that investors here and around the world will lose confidence in our ability to meet our commitments and our obligations. "